DALLAS— The Dallas/Fort Worth area added
more new residents last year than any
other metropolitan area in the country,
according to the most recent data from
the US Census Bureau. For grocers, that
population growth translates into opportunity: more mouths to feed.
The Metroplex attracted 147,000
people during the 12-month
period starting in July 2008.
Within North Texas, Rockwall,
Collin and Denton counties are
the fastest growing, along with
cities on the western side of the
Metroplex.

D/FW has always seen intense compe-tition among food retailers, and bothregional and national chains have longbattled for market share, according toRobert Young, managing director of bro-kerage services for the Weitzman Group.This ongoing battle has chains constantlyjockeying for position there and strivingto get an ever-larger share of the con-sumer pie.

open more stores, and leading chains are
expanding their footprint as well.

In Collin County, for example, Whole
Foods will open in the Village at Fairview in
the second half. And in Frisco, Kroger
opened its first Kroger Marketplace in

January. The 123,000-square-foot
concept combines groceries and
general merchandise departments.
Upscale grocer Tom Thumb
also plans a Frisco location that is
scheduled to open in 2011. The
grocery chain recently debuted a

100,000-square-foot store at the
Shops at Stone Creek, a community project at FM 552 and North Goliad in
Rockwall. And in Denton, Wal-Mart,
DFW’s largest grocery chain, will open
this fall in Rayzor Ranch, a master-

Grocery chains that have had a difficult timecompeting in the past are finding they canopen more stores, and leading chains areexpanding their footprint as well.

Yet, Young notes, the robust population growth means that the overall consumer pie is growing as well. Grocery
chains that have had a difficult time competing in the past are finding they can

Market Correction Aids Valley Multifamily Buyers

As the metropolitan Phoenix multifamily market emerges
from a 12-quarter downturn that produced the lowest occupancies since the days of the Resolution Trust Corp., investors
who worried about weakened revenues and falling rents are
now aggressively competing for assets, anticipating strong
rental growth as the economy strengthens.

Private-capital buyers are flocking to for-sale properties ranging from class A luxury
communities to class C foreclosures, concerned that values,
which dropped
30% to 70% over
the past three years, won’t last now that
occupancy levels are rebounding, new apartment construction is ending, job growth
is resuming and a growing proportion of
single-family homes are moving into owner-occupants’ hands.

More important, investors are banking on the belief that
discounted properties purchased now will reap significant
returns over the next three to five years as a steadily improving
economy restores the strong occupancy and rental growth for
which Phoenix investments have become known. For instance,
representatives from Seattle-based Private Portfolio Group
paid $45.5 million in May for the 512-unit, class A Biscayne Bay
apartment community in Chandler. Significant investor interest was based on the discount-to-peak pricing of nearly 30%.

Recent multifamily listings consist of distressed properties
(REO and otherwise) or conventional sales by owners/develop-ers with maturing debt attempting to recoup remaining equity.
The vast majority of the apartments that have been reclaimed

By Tyler Anderson

by lenders are class B and C communities whose owners have
lost their ability to cover debt service, thanks to deep revenue
corrections. A trend toward cap-rate compression is the result
of the steep drop in net effective rents, creating an opportunity
for revenue growth as the economy improves.

Though market factors are on the mend, the Phoenix multi-family sector is still recovering from several challenges, including the effects of the national recession, which hit the area
particularly hard. Apartment communities located in heavily
Hispanic neighborhoods are still reeling from the passage of
the Legal Arizona Workers Act in early 2008, which drastically
cut into the ranks of the rental population.

Yet as in previous downturns, the recession has done little
to diminish metro Phoenix’s appeal to investors, who continue
to covet the region’s historically robust job and employment
growth, relative affordability, business-friendly atmosphere
and market resiliency. Average occupancies, which slid to 88%
in the first quarter of this year from a high of 93.7% in 2006,
appear to be stabilizing, and in some areas of metro Phoenix
even top 94%, according to Real Data.

Average face rental rates dipped to $768 per month in the
first half of 2010, but are expected to improve in the second
half of this year. Concessions, which rose to more than two
months of free rent for a 12-month lease in 2009, also are fading and, in healthy neighborhoods, are gradually disappearing
altogether.

Look for transaction activity to continue, as sellers, increasingly confident of investor demand, look to capitalize on the
relative lack of available product for sale, and buyers, anticipating an end to discounted pricing, race to snap it up.

Tyler Anderson is a multifamily specialist and vice chairman in CB Richard Ellis’ Phoenix office. Vice chairman Sean Cunningham, also a multifamily specialist, contributed to this column. They may be contacted at tyler.anderson@cbre.com and sean.cunningham@cbre.com. The views expressed here are the authors’ own.